WI: Bernanke to Congress: Control debt, but don’t cut spending

In the spirit of a more open and transparent Federal Reserve Bank, Chairman Ben Bernanke visited the Gerald R. Ford School of Public Policy at the University of Michigan for a Q&A session with audience members and, as he called it, “the Twitter.”

Wisconsin Reporter curated tweets to give readers a general sense of what viewers participating in the live-streamed event wanted to ask Bernanke.

Bernanke said Congress needed to find a plan to bring the Federal budget under control over the next few decades while avoiding actions that might take the economy into recession – such as substantial tax increases or spending decreases in the short run.

He also stressed the importance of Congress raising the debt ceiling, likening not doing so to a family trying to save money by not paying for their mortgage.

Bernanke said the Fed has been successful in bringing down-long term interest rates with its quantitative easing (QE) or large scale asset purchasing (LSAP), in which the Fed has purchased more than $2 trillion in Treasury bonds and securities over the past four years.

He acknowledged, however, that employment rates still haven’t come down to meet the Fed’s dual mandate of monetary policy fostering stable prices and maximum employment.

There is “no completely new method that we haven’t tapped” to decrease unemployment rates, Bernanke said, adding the “aggressive monetary policy” the Fed has pursued has been “extraordinary” in helping achieve full employment.

On inflation, Bernanke rebuffed comments some regional Federal Reserve Bank presidents have made recently on the threat of inflation in 2014 and 2015.

However, asked a question about the Fed’s role in creating asset bubbles, Bernanke said, “The Federal Reserve will keep an open mind on it.”

Bernanke also showed a lighter side not usually seen when he’s grilled by congressional members at Economic Committee hearings.

Asked what keeps him up at night, the Fed Chairman joked, “Well we do have a small dog that sleeps with us. I try to get as much sleep as I can.”

Asked what, as a scholar of the Great Depression, surprised him most about the most recent financial crisis, Bernanke responded, “The crisis.”

The Q&A ended with Bernanke warning the audience about “Audit the Fed” legislation lingering in Congress after former Texas congressman and long-time Fed critic Ron Paul’s retirement.

“The trouble with Audit the Fed is that’s not what it’s all about – it’s a misnomer,” Bernanke said. “All of the Fed’s financials are open to (Government Accountability Office) which could look at anything they want to look at. All activities thoroughly audited with one exception – there is an exception made for monetary policy. Audit the Fed bill would strike that clause.

“If you want a healthy economy, you want a strong and independent central bank, and that will not happen with that bill.”

Here’s what people had to say during Bernanke’s Tweet-in

Is that a Trillion Dollar coin in your pocket or are you just happy to see me? Tweet #fordschoolbernanke